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Nightly Business Report

News/Business. (2013) New. (CC) (Stereo)

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PBS

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00:30:00

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G

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San Francisco, CA, USA

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Comcast Cable

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Channel 71 (507 MHz)

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mpeg2video

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ac3

PIXEL WIDTH
528

PIXEL HEIGHT
480

TOPIC FREQUENCY

S&p 5, U.s. 5, Washington 3, Dupont 3, Julia Coronado 3, Darren Gersh 2, Sean Eagan 2, Us 2, New York 2, Suzanne Pratt 2, Rick Horrow 2, The C.e.o. 2, A.t. & T. 2, Peregrine 2, Lance Armstrong 2, Verizon 1, North America 1, Julia 1, Rajat Gupta 1, Facebook 1,
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  PBS    Nightly Business Report    News/Business.   
   (2013) New. (CC) (Stereo)  

    January 22, 2013
    4:30 - 5:00pm PST  

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let's go. (laughter) you're too small to talk! you're too small to talk. why am i in the monitor? (laughter)
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captioning sponsored by wpbt >> this is n.b.r. >> susie: good evening, everyone. i'm susie gharib. investors like google's earnings news and a burst in ad spending. shares jump after hours. >> tom: i'm tom hudson. with stocks at five-year highs, what's next for wall street?
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what the latest corporate earnings are telling us about the state of the market. >> susie: and an unexpected dip in sales of previously-owned homes caps off the best performance in years for the u.s. housing market. we ask a top economist what's next for housing. >> tom: that and more tonight on "n.b.r." >> susie: solid earnings from two tech titans tonight: i.b.m. and google's results exceeded analyst estimates. shares of both companies surged by 4% or more in after hours trading. i.b.m. earned $5.39 in the fourth quarter, 14 cents more than estimates. and the company gave an upbeat outlook for earnings in 2013. revenues also came in better than expected. i.b.m. benefited from robust growth in its software and services businesses. as for google, earnings per share of $10.65 up sharply from a year ago and 23 cents ahead of estimates. thanks to strong advertising sales, google's revenues jumped 50% to more than $12 billion,
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but analysts were still expecting stronger quarterly revenues. james dix joins us now with more on those google earnings. he's senior analyst at wedbush securities. >> susie: so, james, you just got off the conference call with the c.e.o. of google, larry page. did he give any sense of whether this momentum is going to continue for 2013, of strong earnings and revenues? >> yeah, well, i mean, typically google is somewhat circumspect in terms of their outlook, but in terms of their fourth quarter terms, they were happy with them. geographically they beat my expeations in all of their major geographies, and there was nothing they pointed to in the call that would indicate that momentum is changing as we starter the year. >> susie: how about in terms of ad sales. on the call, they said that google is running on -- firing on all cylinders, to quote them. can google build on that momentum?
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>> yes. i mean if you look at their positions and other major geographies, and the fact that they're handling the transition to mobile search fairly well, it seems like they're in pretty good shape. one thing i point out is that the cost per click, which is metric, which a lot of investors have focused on, was down again in the fourth quarter, but the declines have gotten better in each of the past three-quarters. down 4% if you exclude currency in the third quarter, and down 12% if you look two quarters ago. that should help them with their momentum in 2013. >> susie: you mentioned mobile, and is there anything more about google's mobile strategy, and have they figured out a way to really ca capitalize on google mobile searches? >> mobile is helping the volume of searches they're getting. their average clicks were up over 20%, once again, in the fourth quarter. i think they're continuing
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to roll out products. and they mentioned the products they're rolling out, or that are being rolled out in the android system, targeting the tablet, and the tablet is where they're looking for their partners, and for their motorola to focus and get some more growth. >> susie: i understand that facebook came up on the call, particularly facebook's recent rollout of a graph search. what impact, if any, will this have on google? >> yeah, i mean, larry page, the c.e.o., commented a little bit on all of the investments that google has made over the years on search as their core product, and mentioned, example, all of the technology that has gone into maps, which is a very popular product. i think that is, to some extent, to indicate the most, which google had in terms of search. the fact that people used search to look for services and places, and then avertisers could
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reach them there. at the moment, that's not really what facebook's graph search is about. i would say in the near term, there is probably not going to be much advertising impact on google's search product from facebook. >> susie: as you mentioned a moment ago, investors really snapped up the shares in after-hours trading. you recently raised your target on google to $740, and after hours, it was really approaching that number. what's your view on the stock, buy more or just sit on what you've got? >> i've got a neutral on the stock because there may be some longer-term issues that may play out over the next year or so, but it looks like the top-line trends, i think, were particularly important this quarter. google beat expectations there on their core business. so certainly no reason to think that my valuation of the stock should drop after the results they posted and the pretty good profits they saw as well. >> susie: all right.
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any disclosures to make in terms of google? do you own it or have any personal interest in it? >> i do not own any shares of google. >> susie: all right, james, thanks so much for coming on the program. really appreciate it. james dix of webbush securities. >> tom: still ahead, sales of existing houses cool off a little in december, but it was a red-hot year for home sales. what's next? economist julia coronado joins us. wall street kicked off the first trading day of president obama's second term with solid gains. helping push the blue chips higher were better than expected results from a cautious but hopeful dupont. the dow rose 62 points, the nasdaq added eight, and the s&p up 6.5 points. >> susie: today's gains extend a strong stretch of stock buying, one that began before the new year. despite concerns about corporate profits and debt negotiations in washington, investors are finally embracing equities again. suzanne pratt reports.
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>> reporter: perhaps it's optimism about a fresh start in washington, or maybe it's that the economy is finally building a stronger foundation. whatever the cause, the effect is that the dow, s&p 500 and nasdaq are all are up more than 4% in the first three weeks of this year. wall street veteran art cashin says with interest rates still so low, investors have a new taste for equities, particularly pension funds. >> they've got to up their risk profile, and therefore they're going to buy stocks. and some of that money is coming in not wildly, not open-armed, but somewhat reluctantly. but this is the only road i can take. >> reporter: even with all the positive momentum on wall street, there's still a bit of nervousness about earnings season. less than 20% of s&p 500 names have reported, and so far the results are just okay. a close look at the numbers show
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62% of companies have topped wall street expectations. that's in line with the average since 1994 but below the 65% of the past year. still, it's the red flags companies like dupont are raising about this year that are getting noticed. today, the largest u.s. chemical firm tempered expectations about its business due to the slow global economy. friday, g.e. said the outlook for developed markets remains uncertain even though the conglomerate got a nice earnings boost thanks to its emerging markets business. still, some market pros says most u.s. multinationals are fit enough to stay in the money. >> you know, our companies here in the u.s are pretty lean and mean. they've learned how to make money in a slow-growth environment. i don't think that's going to change, but probably earnings growth this year will probably be about 5% or even a little bit less than that. so, below the long-term average, certainly nothing to write home about. >> reporter: nothing to write home about, maybe, but enough to keep the s&p 500 in positive territory. >> i think, at the end of the
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year, the market is going to be higher than where it is now. our target for year-end 2013 is 1525 to 1575. so, you throw in a couple of percents for dividends, and, you know, that would be about a 10% year. so, we're expecting another good year. >> reporter: before we worry about how stocks are going to do in the next 11 month we've first got to get through tomorrow. that's when tech heavyweight apple reports its quarterly results. those come out after the bell. suzanne pratt, "n.b.r.," new york.
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>> susie: the white house says president obama won't "stand in the way" of the short-term increase in the debt ceiling that's been proposed by house republicans. the move to extend the nation's borrowing limit for three months is set to come to a vote tomorrow. and that news has reassured markets that the risk is fading that the u.s. will default on its debt for the first time in its history. darren gersh reports. >> reporter: house speaker john boehner said republicans were willing to suspend the debt ceiling for three months. sending democrats to act. >> it has been nearly four years since the senate has done a budget. most americans believe you don't do your job, you shouldn't get paid. that's the basis. no budget; no pay. it is time for the senate to act. >> reporter: the white house called the move by house republicans "significant," though the administration still argues a short-term extension of borrowing authority does not go far enough. >> what we support is a long- term raising of the debt ceiling
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so that we don't have any doubt or uncertainty for businesses or the global economy about the simple proposition that the united states always pays its bills. >> reporter: at a house hearing on the debt ceiling debate, simon johnson, a former chief economist for the i.m.f. warned the continuing controversy could roil global markets and hurt the u.s. at home. >> if you don't raise the debt ceiling now, or if you postpone this confrontation, if you say every 60, 90, or 100 days, we're going to again have the same kind of conversation aut the debt ceiling, you will continue to have this sort of spike in policy uncertainty. you will continue to undermine the private sector. you will continue to delay investment and to reduce employment relative to what it would be otherwise. >> reporter: the debt ceiling extension would allow the treasury to pay the nation's bills through at least may 19. darren gersh, "n.b.r.," washington
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>> tom: the u.s. housing market had a quiet end to its best year since 2007. sales of existing homes fell unexpectedly in december by 1% down to a 4.94 million annual rate. analysts note the drop in sales is not entirely bad news because there were fewer homes on the market. inventories are at their lowest level in seven and a half years. sales were up in the northeast and western u.s. while they fell in the midwest and south. for the entire year, existing home sales saw their best year since 2007. >> tom: julia coronado is the chief economist of north america, and she joins us from new york. julia, how much more do you think housing can continue to improve without real significant increases in job gains? >> well, i think that what we're expecting is more pretty decent but moderate improvement in housing, and that will come with
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some job gains. but this is a housing recovery that is going to look a little bit different from the ones in the past. people are more cautious in their view of housing. nobody is rushing in expecting some massive price appreciation. and there is still a lot of extra supply from the past that is going to come to the market as conditions improve. so it's going to be a good story, i think, for 2013, but i think we should caution against looking at past housing booms and expecting that kind of a dynamic to take hold. >> tom: so what are the conditions do you see that are going to help sustain the housing growth that we've seen over the past year? >> well, i think that we finally did see prices reach a point that they are in line with people's budgets and fundamentals. low rates are certainly helping. rising rents are certainly helping. there still is a preference for rentals among young households, but the more rents rise
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and home prices fell, the more that calculus shifted in favor of housing. so i think that means we've reached truly sustainable levels in terms of home values, which means we can continue to see improvement from here. but, again, i think it is going to be slower -- very slow appreciation. >> tom: right. >> going forward. >> tom: let's talk about the cost of cash when trying to buy a house when you're borrowing money because mortgage rates have continued to drop for several years. this is the year you saw mortgage rates drop at least enough that buyers finally stepped back in. 3.35% at the end of last year. is this cheap money going to continue even if the federal reserve begins to take back some of the bond-buying schemes that it has undertaken over the past year? >> well, i think this is one reason the fed probably won't scale back their policies y time soon. these green shoots in the housing market are certainly something they have cited lately at
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evidence that their policies are starting to bear fruit, and they can and will make sure that rates stay low for a while. so i think that this is one reason that they'll keep that foot on the gas pedal through 2013 and maybe into 2014, to make sure that that really self-sustaining dynamic takes hold. >> tom: one of the big metrics that the federal reserve has is that unemployment rate. taking a look at the housing impact on the economy for those jobs involved in home construction and residential construction, those jobs have been choppy over the past two years. 565,000 in the last month. that certainly is an improvement, but it remains half of what it was during the housing boom. are those jobs going to come back? >> right. again, i think gradually, yes, but not to the same degree that they did before. we're not going to see the kind of frat and leverage-driven boom that we saw before. this is going to be an improvement that is bed
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on costumers' budgets, and that means that gradual improvement and a gradual pickup in hiring will ensue, rather than that sort of turbo-charged boom in both building home prices and jobs that we saw in the mid-2000s, and we don't want that kind of a boom, either. we've seen that that is not sustainable, so gradual improvement, i think, is a good story. >> tom: gradual and sustainable improvement at this point for homeowners and new home buyers. >> and sustainable. >> tom: two key words when it comes to the housing market in 2013. julia coronado along with us.
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>> susie: credit rating firm eg jones and its president, sean eagan, were banned today from rating certain bonds for the next year and a half. the securities andes and exchane commission says the firm and its founder, sean eagan, agreed to the 18-month ban. the deal settles allegations the firm misrepresented its operations and violated conflict of interest provisions. tom, egan jones is one of nine credit ratings firms registered with the s.e.c., and it specializes on assigning ratings for corporate debt issues. >> tom: it really focuses on the firm's ability to rate government securities and government asset back securities. we spoke with sean egan when the s.e.c. first levied these charges last april. the agency, sean, isn't calling into question your ratings. instead, it's talking about your application itself.
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what about the information on that application? >> that is the issue, and, according to the s.e.c., we think it's a paperwork issue that we... i w responsible for filling out that form. i fied it out in accordance with our lawyers' guidance. they said, "fill it out as honestly and accurately as possible," and i did. if i had to fill it out again today, i would do exactly the same thing. >> susie: it will be interesting if he really thinks that today in january. unfortunately, egan was not available for comment tonight. >> tom: we have an invitation to him, however, on this first trading day on this shortened trading day. stocks began the shortened trading week by adding to recent gains. the s&p 500 didn't manage to pull itself into positive territory until the early afternoon as traders and investors digested the morning earnings. the afternoon rally pushed the index up 0.4% to a new five-year high.
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trading volume was 697 million shares on the big board. 1.8 billion on the nasdaq. the materials, financial and energy sectors topped the gainers, each increasing 0.9%. we are in the first of the three heaviest weeks of corporate quarterly earnings, and the focus was on chemical git dupont today. the company earned 11 cents per share, less than a third what they were a year ago but still four cents better than estimates. dupont said it is seeing early improvement in its titanium dioxide business. that product is used as pigment in paint and other products. it's seen as an indication of overall industrial strength. on that note of optimism, shares were up 1.8%. this is the stock's highest price since issuing an earnings warning back in october. gold and copper miner freeport mcmoran led the gains in the materials sector, rising 4.6%. it is the world's biggest public traded copper miner with a big presence in indonesia.
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despite a drop in production there, fourth quarter earnings were up stronger than expectations. freeport called it an abnormal year at its indonesian mines. it expects production there to pick up this year. earnings also were in play in the financial sector. insurance company travelers paid out $669 million in claims from superstorm sandy, but that didn't hurt profits as much as analysts feared. travelers earned 72 cents per share last quarter, only about half what it earned a year earlier but more than five times estimates. shares responded nicely to the surprise, rallying 2.1%, pushing shares to a new high. two items to focus on with the two big phone companies. first, a.t.&t. is expanding its wireless business. the company is buying the retail operations, subscribers, and, most importantly, the wireless licenses of atlantic tele- network. the price was $780 million. a.t.&t. shares gained 0.5% while atlantic tele-network jumped 12.3%. the wireless carriers have been
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looking for spectrum to expand their services. verizon, meantime, reported quarterly results a nickel less than expected. like other carriers, while it sold a record number of smart- phones over the holidays, many of them came with heavy subsidies hurting short term profits. the stock gained 0.9%. it hit a two-month low last week. tomorrow night, we will hear from apple about its holiday quarter. this quarter, the anticipation has been building for research in motion and the introduction of its newest blackberry device. shares continue to rally, up 13%. the c.e.o., thorsn heins, told a german newspaper the firm continues thinking about strategies like licensing its blackberry software or selling its hardware business. shares of rimm have more than doubled since july. on our web site, www.nbr.com, there's more analysis of the stock chart. you will find it under the "blogs" tab. just look for michael kahn. three of the five most actively traded exchange-traded products were up. the japan index fund saw the
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heaviest selling, down 1%. and that's tonight's "market focus." >> susie: a big win for the keystone x.l. pipeline and transcanada's plan to connect canada's rich oil sands to refineries in southern texas. nebraska's governor today gave the thumbs up for that pipeline's new route through his state. it's one of the last hurdles the pipeline needed to clear before receiving final approval by the federal government. late today, the u.s. state department said its review of the pipeline project has been delayed and won't be ready until after march.
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>> tom: updates tonight in three high profile investment fraud cases. first up, rajat gupta. he is the former goldman sachs board member convicted on insider trading charges. today, he asked a federal appeals court to reverse that conviction because he believes the judge made a series of incorrect rulings in his case. in the stanford financial ponzi scheme, allen stanford's top lieutenant was sentenced to five years in jail today. james davis was the chief financial officer at stanford financial, the company behind a $7 billion fraud. and finally, prosecutors today put a final tally on losses tied to the fraud at peregrine financial and its futures brokerage, p.f.g. best. the amount: $215 million. that's how much they say was embezzled from customer accounts. peregrine's founder and former boss, russell wassendorf, sr., has pleaded guilty to the crime, but he claims the losses were far smaller. >> susie: tomorrow on "n.b.r.," apple. all eyes are on the tech giant as it rolls out its latest earnings after the bell.
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we'll see if its core iphone business remains strong. also tomorrow, the best thing you can do now to save on taxes and boost your retirement security. details in our "money file" segment. the admission by lance armstrong that he took performance enhancing drugs came only after companies like nike, radio shack and others paid him millions of dollars to endorse their products but then dropped him. here's rick horrow with tonight's "beyond the scoreboard." >> reporter: oftentimes, the best athletes also are the best sales people. with so much money available from endorsements, the incentive to lie and cheat is multiplied as their stardom rises. in the last few years, several high-profile athletes have been brought down by scandal: golfer tiger woods with his extramarital affairs; olympic swimmer michael phelps with smoking marijuana; and, of course, lance armstrong with doping. in each case, the damage ne t their image had the collateral effect of costing them multi- millions of dollars in endorsement money.
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in a sense, it's warranted to blame athlete lying and cheating on big paychecks from sponsors. as long as playing contracts and prize money will still be available after a scandal, from the athlete's point of view, losing endorsement deals is the worst thing that can happen. lying and cheating would still exist even if there were a way to regulate the amount of sponsor money. but there's no question that the threat of losing the big dollar sponsorship deals is a major reason for covering up the cheating. i'm rick horrow. >> tom: finally tonight: holy sticker shock, batman. a working batmobile from the 1960s television program went up for auction over the weekend. the 19-foot-long, black, bubble- topped car driven by tv's batman, adam west, sold for $4.6 million in arizona this weekend. the batmobile was based on a one-of-a-kind concept car by lincoln called the futura, which debuted back in 1955.
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>> tom: and, susie, you better gas that thing up quite often. the miles per gallon, somewhere between seven and 10-mile per gallon to catch the criminals. >> susie: that is not what it was all about. it was just a cool gadget. that's "nightly business report" for tuesday, january 22. have a great evening, everyone. and you, too, tom. >> tom: good night, susie. we'll see you online at www.nbr.com and back here tomorrow night. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org
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>> join us anytime at nbr.com. there, you'll find full episodes of the program, complete show transcripts and all the market stats. also follows us on our facebook page at bizrpt. and on twitter @bizrpt.
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